By Natalie DeCoste
Orders for planes, cars, and other long-lasting products increased in June, showing signs of a strong U.S. economy amidst struggling manufacturers continue to deal with shortages in both parts and labor and higher material costs.
According to U.S. Census Bureau data from Tuesday, new orders for manufactured durable goods in June increased $2.1 billion or 0.8 percent to $257.6 billion.
“This increase, up thirteen of the last fourteen months, followed a 3.2 percent May increase. Excluding transportation, new orders increased 0.3 percent. Excluding defense, new orders increased 1.0 percent. Transportation equipment, up two consecutive months, led the increase, $1.6 billion or 2.1 percent to $77.5 billion,” read the Census Bureau’s report.
The increase reported by the government fell short of The Wall Street Journal’s expectations based on economists they had surveyed who predicted a 2% increase. The percent increase came up short primarily because new orders in the prior month were revised upwards. Data from May was revised to show a 3.2% gain instead of 2.3%.
The demand for durable goods has performed well over the last few months as low inventories at businesses and retail stores have increased demand for manufacturers. Despite the rising demand, manufacturers are still constrained by supply chain issues that have strangled production and delayed shipments.
“Despite supply chain challenges the outlook remains bright,” said Wells Fargo Securities economists Tim Quinlan and Sarah House during their analysis following the release, citing continued gains in core capital goods orders.
Even with the shipping issues, the Census Bureau reported that shipments for durable goods have been up for a few months. The data showed that shipments of manufactured durable goods in June increased by $2.5 billion or 1.0%to $250.7 billion. The June data followed the recent trends, which had shipments up three of the last four months.
The June increase followed the month of May’s increase of 0.4%. One notable category was transportation equipment, which was up following two consecutive monthly decreases. In fact, transportation equipment led the increase, $0.8 billion or 1.1 percent to $71.6 billion.
Also, part of the Census data was new orders for nondefense capital goods excluding aircraft, the core capital goods orders Quinlan and House looked at optimistically. The core capital goods orders are a closely watched proxy for business investment, making them an important category for investors. The data showed an increase of $2.6 billion or 3.1% to $88.9 billion. Shipments for these nondefense capital goods increased $1.5 billion or 1.9 %to $79.2 billion.
“Business investment is on a powerful upswing even if consumer spending has downshifted from the earlier blistering, rebates-stoked pace,” said senior economist Sal Guatieri of BMO Capital Markets.
